Yancoal: The Saskatchewan Potash Question
(12 pages of text)
AWARD WINNING CASE: European Foundation for Management Development (EFMD) Case Writing Competition 2014 — Emerging Chinese Global Competitors category.
In 2011, a major coal producer in China — Yancoal — must make several decisions in terms of product and geographic diversification. One option is to retain its focus on the coal business. Here, it can acquire other coal assets in Australia to further increase its coal reserves. Another option is to acquire 19 potash-exploration permits in Saskatchewan, Canada. This represents an opportunity for both product diversification and further geographic diversification. Yancoal has to decide whether it should focus on the coal industry or pursue the potash opportunity as well.
This case examines the dimension (product versus geographic), path and pace of diversification. At the product level, this case contrasts the pros and cons of “more related” and “less related” diversification. Students must consider the factors that may govern the path of diversification and constrain the pace of diversification. While diversification is an important approach to growth, there are risks and limits as a firm moves away from its core competence. This case reflects a pattern of Chinese firms acquiring foreign assets in recent years, and shows the common challenges they confront.
This case is intended for use in a core strategic management course. Alternatively, it can be used in an international strategy course. When used in a strategy course, this case is suitable within a corporate-level diversification module. In an international strategy course, it can be used in sections dealing with firm internationalization/globalization.
Mining, Quarrying, and Oil and Gas Extraction
China, Canada; Australia, Large, 2011
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